Articles
"We need to watch our global competitors in regard to regulating the
housing market. In March this year the China
Daily called for the housing market to be
regulated to control prices. If China does
this, it will enable Chinese workers to
continue to be able to afford to work for lower
wages and as a consequence for China to maintain
its competitive price advantage over UK
industry."
There
is despair across our nation at the cost of
providing a home. Our society depends on people
doing a variety of work, much of it
traditionally low paid but important
nevertheless. We expect people to work for
modest salaries from shop work to health care
and much in between and yet somehow find a home
they can afford.
Increasingly people are being unable to achieve
this and are forced to consider trying to move
to less expensive areas or pursue money-driven
rather than vocational career paths.
From those that remain for example in the public
sector can we realistically continue to expect
to get the best from them if they are left to
fend for themselves in a wilderness of low
quality and expensive housing market forces are
creating. Something has to change.
House prices are controlled by the price
mechanism based on supply and demand,
influenced by regulation. The supply of land is
finite and we further restrict the supply of
housing by regulations such as the Green belt
and planning laws so we should manage the
effects of high demand by not allowing it to
push prices every upwards.
Demand is increased by rising incomes or both
partners working, cuts in mortgage rates and
lifestyle with people wanting to live on their
own.
The problem is that if income rise, prices rise
and people are back to square one. If mortgages
become cheaper or are provided say by Mutuals
people may not always benefit because this may
be snatched away through a commensurate rise in
prices. So how can people get ahead?
The best way to significantly ratchet up the
standard of living of people in this country is
to break into this cycle and put the brakes on
rising housing costs through regulating the
house price mechanism, directly and indirectly
by managing factors that influence it. This
would enable incomes to rise without people been
penalised by rising prices.
No one is immune from the consequences of
rampant house price inflation. Among the first
to suffer from house price inflation are those
living in expensive housing areas who lack key
workers forced out by high house prices, they
have illusory wealth, capital that is only
released on sale of their property, and vanishes
again when the person buys another home.
The house price surge has infected most of the
UK so freeing this capital by relocation to
distant parts is less of an option.
Some feel that importing migrant labour is the
answer to filling vacancies in key services but
taking key workers from any country is both
unethical and a short-term strategy because once
here as soon as they can, they are bound to join
the exodus to less expensive areas. Also an
increasing population increases demand.
The children of the affluent suburbs and friends
of people living there usually also have to move
far away. This means that they cannot, even if
they wanted to care for aging parents and the
State has to take responsibility.
Regulation needs to return to the rental market
as well. Rent controls, scrapped in 1988-99 as a
way of solving homelessness by encouraging
people to rent out properties has caused the
cost of housing benefit to quadruple to £12
Billion a year as landlords realise that they
can charge what they like in the knowledge at
the end of the day the state will pay. This has
been totally abused and has distorted the price
mechanism. The states intervention in the market
has made life even harder for low wage earners
not eligible for social housing.
A return to controlling rents for a start could
save £billions a year in housing benefit
subsidies. Even the social housing world to
their shame has jumped on the band wagon of
market rents paid for by housing benefit. Most
agree subsidy to should be in the property not
the individual.
We could increase supply by allowing communities
to charge higher council taxes to discourage
second homes. But cutting interest rates as
currently mooted by the Bank of England would
increase demand and hence prices so back to
square one.
Also if housing is regulated wage demands can be
moderated as people will be better off even if
working for less and this will boost our
country’s global competitive position.
Research by the FT way back in 1986 has shown
house prices feed wages and wages feed house
prices
thus increasing costs for industry making it
less competitive.
We need to watch our global competitors in
regard to regulating the housing market. In
March this year the China Daily called for the
housing market to be regulated to control
prices. If China does this, it will enable
Chinese workers to continue to be able to afford
to work for lower wages and as a consequence for
China to maintain its competitive price
advantage over UK industry.
http://www.chinadaily.com.cn/english/doc/2005-03/31/content_429777.htm
China
Daily)
Updated: 2005-03-31 08:48
http://www.housingoutlook.co.uk/Papers/ancient1.html
How House Prices Fuel Wage Rises
John Muellbauer
Financial Times
23 October 1986
http://216.239.59.104/search?q=cache:v0nzSjKXAUwJ:www.povertyinformation.org/fileuploads/Fri_10_amspiu_briefing_6.doc+%22cost+of+housing+benefit%22+%22rent+controls%22&hl=en
SPIU Briefing Sheet 6: Paying for HousingOctober
1998
Article 2 How the housing
market could be regulated directly and
indirectly
Following
the case for regulating the house price
mechanism, many might agree but might ask if it
can actually be done?
Following the article for regulating the house
price mechanism to curb skyrocketing house price
inflation may I suggest the different ways it
may be achieved. House prices can be influenced
by direct government measures or indirectly by
intervening in the factors that influence price
including supply and demand. As it runs counter
to the myth that people can increase their
prosperity from a rising market it might be
harder to persuade people to accept direct
controls on the sale price of homes and
allocation in a static market price-wise by
housing points as well as income, However
re-introducing immediate direct regulation of
the rented sector might be politically easier.
If the state is re-intervening in the market by
regulating rents it could be argued that it
might need to meet the shortfall in income for
an agreed time. Rent controls would save
billions in housing benefit and those needing to
rent would see their real standard of living
rise markedly. Those who see property as a
pension option could be persuaded that cheaper
homes will cut worker costs boosting industry
and hence the stock market. The Government would
also need to revert to 100% start up grants for
housing associations from the current 60%. Lower
rents encourage more to work and not claim
housing benefit and research has shown this
would overall save the government money.
Supply of local authority housing can be
maintained by scrapping right to buy and
increased perhaps by radical ideas such as
allowing people to leave their properties to the
council in return for housing rights for their
children or people they nominate. Maybe all land
should revert to the state on death. This would
increase supply. Perhaps the council could rent
properties and let them at subsidised rents.The
social housing world should be extend its role
to help all those who cannot afford to purchase
a home including lower paid workers and
students.
The fastest way to gain some sort of control
over the price of housing may be by indirect
measures and strategies as convincing the nation
to accept direct regulation will take
time.Indirect measure might include higher
council taxes for second properties which would
reduce demand, increasing the supply of houses
which would lead to a fall in prices.
We might consider the ethics of owning a second
home and perhaps in time the case could be made
for a ban on owning more than one property.
The supply of housing over demand can be
increased reducing prices by building upwards,
downwards (from basements in private homes to
underground cities) or on water with floating
cities. High rise living might succeed with a
radical overhaul of design with for example
gardens and communal spaces built on all levels
and tight management. Residents make slums not
design.
Supply should not be increased by destroying our
countryside or by exporting our problem.
Higher concentrations of houses on land are
possible if socially and practically public
transport becomes first choice and car parking
spaces are not required.
Anything that discourages people from keeping
properties empty or speeds up the sale of homes
or letting of properties can marginally increase
supply.
Demand for housing might be reduced by
communities for single people with considerable
social and financial advantages. People are
generally only presented with the option of
living on their own. There is no national
programme that I know of organised shared living
for people of different ages and backgrounds.
I’m thinking of everyone, not just for
specialised groups.
Communities need to be designed with space and
privacy in mind allowing time alone combined
with central meeting places. It would need to be
expertly managed by highly trained specialists,
principally psychologists who know how people
fit with each other, putting the group together
and intervening where necessary. Friends or any
group might get together and asked to be housed
in their own community.
Short-term small therapeutic communities for
newly single people from bereavement, separation
or recovering from illness could help.
Attempts to offer single people shared
accommodation often fail because lettings teams
lack the aptitude and qualifications needed.
Current so-called communities run by social
housing providers are more like warehouses. A
community should have around 6-8 people not
hundreds. Currently in what passes for community
living people are thrown together and anyone
living near such places knows what the result
is; bedlam.
Existing tools that dampen the speculative
nature of home ownership include capital gains
tax and stamp duty although ideally, regulation
would not need to take money away from
people. Investing in any organisation or
strategy that reduces relationship breakdowns or
the fragmentation of families can reduce the
demand for alternative accommodation. The
amount of money available to drive up house
prices can be reduced by restricting mortgages
according to income and by inheritance taxes,
although demand for rented accommodation would
increase proportionately.
Much of this debate impinges on perceived
notions of individual freedom. What right does
the state to intervene in our lives? Although it
does so already, including the housing market
but not in a way that controls prices. Real
freedom is where people are not enslaved by
factors beyond their control. The current free
for all in housing means that is the survival
generally of the financially strongest. We all
suffer as a result. Direct and indirect
regulation would tame this jungle.
Briefing Note: Housing & regulation
May 2006
The
media seem awash with programmes about making
money out of property and the Government is to
introduce measures that will further inflate
house price inflation and encourage ownership of
second homes. Local people particularly in areas
like Yorkshire find it nigh on impossible to
purchase a first home.
"housing costs are directly linked to costs to industry as people have to
earn more if the cost of living rises, making UK
industry less competitive." One of the articles
I will send you discusses how a debate in China
to regulate house prices there could affect our
competitive position.
Society needs people to variety of jobs, many of
whom are vital but relatively poorly paid. Such
people cannot compete in an unregulated housing
market against people from outside who may be in
much higher paid (though not necessarily as
useful) jobs.In the first article I try to put
the reasons for regulating house prices and in
the second suggest ways it might be done. For
instance from the second article
I suggest"Indirect measure might include higher council taxes for second
properties which would reduce demand, increasing
the supply of houses which would lead to a fall
in prices.
We might consider the ethics of owning a second home and perhaps in time
the case could be made for a ban on owning more
than one property."
Below I try to give a background to the general
idea of regulation.
I hope this idea will interest you and that you
might consider using the articles. as a basis
for a story. They should find a resonance with
the public.
Regulation as a free fiscal tool available to Government: 23.2.06
Background to the use of Regulation to help our communities
A couple of months ago the news featured story
on house prices and a Devon village where the
actions of the villagers to restrict purchase
and re-purchase of the affordable homes to local
people is perhaps an act of regulation, which is
a free fiscal tool available to government.
And I think one of the Exmoor National Park is
trying something similar.
On a wider scale regulation might be the way to
control skyrocketing house price inflation.
Direct regulation on house prices might be
difficult to introduce (although it could be
reintroduced in the rental market where it
existed up to 1989) but indirect levers on house
prices might be more acceptable and could used
to cool the market.
And I feel in light of recent government
proposals to encourage investment in property as
part of pension provision it might be topical to
not only warn of the disadvantages of this but
also of the great benefits our economy and
society would get from cooling the market
through some form of regulation, direct and
indirect.
This is the subject of two articles I have
written. I will email them to you, following
this email and wonder if might use the articles
themselves or whether the idea of regulating the
housing market might be something you or your
colleagues could cover in the future.
The media has been running with the housing
market recently. One featured calls for an
interest rate cut to stimulate the housing
market and mentioned the controversial
self-invested personal pension scheme that would
see residential properties been used as part of
pension provision.
I think this is a huge mistake not so much
because of the lost revenue to the Exchequer but
because it will further inflate the housing
market and housing costs are directly linked to
costs to industry as people have to earn more if
the cost of living rises, making UK industry
less competitive. Essentially countries overseas
are increasingly able to undercut us because
their cost of living is much lower. And the
biggest cost to anyone is the cost of providing
a home. Far from boosting house prices the
government should be trying to bring them under
control. House price inflation harms our economy
and UK industry as well as harming our the
social fabric of our communities.
Peoples pension funds would be boosted by a
rising stock market and this could be achieved
by radically reining in house costs not the
reverse. It seems the government is pushing
things the other way. Also if people were able
to spend less on housing it would boost consumer
spending.
Eventually whatever any government does the
whole pyramid like structure of over inflated
house prices will come crashing down ie they
will run out of ideas or money to sustain it
although perhaps it will not occur on their
watch.
It would also be helpful for our economy and
peoples pensions for the government to encourage
people to invest in industry not offer them
attractive short-term alternatives speculating
in housing.
I have a background in housing and have written
these two articles that explore the idea of
regulation, in this case the advantages of
regulating the housing market. In the first
article I try to make the case for house price
regulation and in the second I explore how it
might actually be done, directly and
indirectly.
Regulation is both an overused and underused
free fiscal tool that the government has.
Overused because in some cases there is too much
red tape. Various forms of token monitoring
required by government departments sometimes
achieves less than it should and can waste a lot
of time while providing a fig leaf and mislead,
suggesting sometimes consumers are content with
something or are listened to when in fact in
reality they may not be and bad practice may be
present (ie an example of this may be the
numerous so-called tenant participation
initiatives in social housing giving the
illusion more than substance perhaps to
inclusion and accountability between tenants and
social housing departments) . Badly designed
forms for police require hours to complete.
Perhaps these need to be trimmed.
So any regulation can carry a cost. It needs to
be well designed and carefully thought out.
However there is an ingenuity about regulation
that in some cases can bring great benefits to
the community
Regulation already abounds, regulating the
quality of food sold as just one example has
made the nation much healthier. It does not
carry a financial cost to government which I see
as one of its strengths . Governments do not
have to own the factors of production but they
can regulate them.
Just a few examples of potential regulation to
illustrate the point might be say around the
issue of improving the protection of the
environment.
For example if the government regulated the
amount of packaging a product could have,
companies in theory would be happy because they
would be on the same level playing field as
their competitors. (Industry would need given a
reasonable lead in to such changes). They would
invest more in their design teams to produce
attractive packaging based more on good design
and ideas rather than sheer mass of packaging
material. This would save raw materials and save
on disposal and landfills later down the line.
Another example might be recycling paper. There
is some resistance to using it because recycled
paper can appear to be a bit muddy and less
attractive to consumers. Say however the
government regulated that new printing dyes
needed to be used that were easier to wash out
this would lead to cleaner recycled paper which
would be more attractive.
Or if a 30year old idea was brought back that
plastic containers had to bio-degrade in time ie
in sunlight then this would also help our
environment.
The whole concept of how regulation could help
the world might be something that could
fire readers imaginations. I’m sure the ideas
are out there and they could really develop and
extend the concept and its application in their
own areas of life and expertise.
Regulation is as old as the hills and can in
this case I believe help tackle house price
inflation that is slowly strangling our
communities and our economy.
There are a lot of vested interests who will cry
foul but in light of the new government
proposals to further inflate the housing market
perhaps it is reasonable for an alternative
scenario for the future direction of the housing
market price-wise to be mooted.
(China Daily)
Updated: 2005-03-31 08:48
It is time for the government to intervene in
the redhot housing market, otherwise it runs the
risk of spiralling out of control. For many
would-be urban home buyers, their dream of
owning a home continues to disappear as house
prices surge nationwide. Some
economists attribute the surging prices to
inadequate supply in the market, arguing that
prices will fall as supply increases.
This
is in line with classic economic theory that
says that in a competitive market, as supply
goes up prices usually go down. However,
as a special commodity, such a rule may not work
in the housing market in China.
Housing is not a consumer good, but an
investment, a feature that makes its
price-setting mechanism markedly different from
other commodities. There exists no price
equilibrium in the investment goods market. The
price of such a good is usually decided by its
expected returns.
Housing is a quasi-public good and has a social
dimension. The government is usually responsible
for providing public goods.
In China, sweeping urbanization in recent years
has led to an explosion in the urban population
and a severe shortage of housing in many cities.
In order to solve these problems, the government
has to step into the property market because
housing development and other public
infrastructure projects are part of the
government's overall planning strategy.
The negative effects resulting from real estate
developers' market segmentation strategy is
another reason why the government needs to
intervene in the housing market.
Market segmentation is a strategy used by
enterprises to tailor their products to
different consumers or different market layers
in order to maximize returns.
Low-income group's low purchasing power often
leads them to be ignored by the market, which
tends to favour high-income groups. This is the
case in the housing market. In order to
guarantee low-income families' housing needs,
the government should provide them with low-rent
homes, economy housing or set up a housing
security system. In this sense, the government's
intervention in the housing market would not
only better optimize social resources, but also
be conducive to achieving social justice.
The
current housing market also makes government
intervention a pressing task. The
property market has witnessed four consecutive
years of sizzling growth since 2001. Investment
has risen sharply and, despite soaring prices,
housing sales are also brisk.
In many cities, the amount of housing sold is
more than the housing that is being built,
lowering the vacancy rate.
But neither investment or sales volume should be
used as a reference point to judge whether the
housing sector is overheating, nor should the
gap between demand and supply be similarly used.
Unlike ordinary commodities, housing usually
involves huge amounts of credit, both for
developers and for home buyers.
The current brisk house sales and good returns
does not necessarily mean ultimate returns will
be as good.
The current boom will spur developers to build
more homes which may exceed future demand in the
market, resulting in a glut.
So individuals and developers could end up with
a huge amount of bad bank loans.
For the property industry, the growth of urban
residents' disposable income should serve as the
reference point when making building decisions.
If this growth of disposable income and the
amount of housing available are not parallel, it
could mean the real estate industry is not
sustainable, or that spending on house buying is
affecting other forms of consumption.
This is what is happening in the country now.
House prices in some cities such as Beijing,
Shanghai and Hangzhou have shot up wildly to a
degree that they are now way beyond ordinary
people's reach.
This is a phenomenon that should be taken
seriously.
According to the National Bureau of Statistics (NBS),
urban residents' disposable income grew annually
by 10 per cent on average from 2000 to 2003.
House sales increased annually by 30 per cent on
average during the same period.
In 2003, total house spending as a portion of
total urban residents' disposable income
amounted to 16.7 per cent, a figure that was
higher than America's in 1999, which was 13.65
per cent.
If there is not prompt and powerful government
intervention, a serious housing bubble will be
in the making. And exorbitant, rising house
prices will worsen the lives of those newly
settled in our cities.
-
But what should the government do?
-
It is recommended that a special body should
be set up to handle the public housing
issue.
-
One model is the Hong Kong Home Authority, a
quasi-official agency which is responsible
for determining and implementing public
housing programmes.
-
A similar body could be tasked to protect
low-income groups when the government's
economic development target is at odds with
the public housing system.
-
-
The government could consider the following
immediate measures:
-
A high rate of tax could be levied on house
buying to curb property speculation.
-
A house market information network should be
set up.
-
A transparent information system could
effectively prevent the market from being
manipulated by some players.
-
The government's policy on tightening land
management should be strictly followed to
the letter.
-
The government should increase the supply of
public housing for low-income groups.
How House Prices Fuel Wage Rises
John Muellbauer
Financial Times
23 October 1986
One of the great puzzles of the UK
economy is why, despite massive
increases in unemployment, an apparent
transformation of the industrial
relations scene and an environment of
global disinflation, wage inflation
remains so high.
Our recent research(*) on wages finds
the housing market to be centrally
implicated in the inflationary process;
I suspect that the housing market is as
important as the deficiencies of the
UK's labour market institutions and its
system of training and education in
explaining the country's relatively poor
post-war economic performance. We now
appear again to have embarked on a
spiral of domestic inflation in which
house prices feed wages and wages feed
house prices. Worries about the exchange
rate in the inflationary process have
been exaggerated.
There are three chief mechanisms by
which house prices affect wage
settlements. First, house prices are an
actual or prospective elements of the
cost of living for those buying or about
to buy a house, even if this is not
reflected in the Retail Price Index.
Second and perhaps even more important
is the effect on house prices on labour
mobility. When house prices rise, those
in the more prosperous areas lead. This
makes it more expensive for those in
less prosperous areas to move and
increases the mis-match between
unemployed people and unfilled job
vacancies. Lastly, it may be that house
price inflation in excess of retail
price inflation is a cause of increased
inflationary expectations. It could also
conceivably be merely a symptom, in
which case conclusions drawn here are
overstated.
We have built upon the well-known
Layard-Nickell real wage model for
annual data to provide the empirical
evidence. Included in Stephen Nickell's
latest version of this model, the real
new house price of two years ago and a
regional house price difference both
weighted by the proportion of owner
occupiers, shows both effects to be
strong and stable over time.
According to our estimates, the
forces that pushed up real house prices
and regional differentials in the last
three years have added, or will add,
about 4 per cent to real wages and,
because of feedbacks, much more than
that to nominal wage inflation into
1986. Preliminary work with quarterly
data confirms an average lag of two
years, though some of the effects occur
in the first year.
To explain why house prices are not
an ingredient in the wage equations of
any of the major macromodels, I suggest
first the surprisingly long lag of their
effect; second, the rapid feedback from
earnings to house prices, demonstrated
by the econometrician David Hendry,
makes confusion between lagging house
prices and earnings easy; third, wage
equations have not usually included the
theoretical sophistications of
Layard-Nickell, and finally, in the
past, with a lower proportion of
owner-occupiers, house prices were less
important.
Probably the single most important
reason for recent rapid house price
increases has been the disappearance in
about 1981 of mortgage interest
rationing. The housing market may be the
major channel by which the money supply
influences inflation directly rather
than via interest rates. If this is so,
it is ironic that, at the very time the
monetarist cure for inflation was being
most strongly implemented, the
mechanisms effectively to control
mortgage credit were being dismantled.
More fundamentally, there can be no
doubt of the central role in house price
inflation of mortgage interest tax
relief, which has helped to guarantee
real rates of return that, over the
years, have overshadowed those on other
assets. Given the effect of house prices
feeding back into earnings, there was a
potential tinderbox which again and
again threatened to ignite. In the past,
the lid was kept on by mortgage
rationing, incomes policy and sometimes
by high interest rates. In the 1980s,
the lid had been high interest rates and
increasing unemployment.
Let us consider the correct policy
response. It should not be deflation
through higher interest rates. The
conventional view is that raising
interest rates slows inflation by
strengthening sterling, thus reducing
import costs and cutting demand for
goods. To these must be added the effect
via the housing market. However, our
empirical research reveals significant
offsets. First, cutbacks in production,
which reduce labour utilisation,
increase unit costs and prices. Second,
sudden shocks, whether positive or
negative, result in additional hiring or
firing costs and these get passed on to
prices. All three are reasons to avoid
Stop-Go macroeconomic policies.
There are other , more long-term
limitations on the effectiveness of
deflation, whether policy-induced or
not.
Deflation eventually reduces the
effective supply of labour and of
productive capacity so that, when demand
picks up, inflationary pressure is more
likely.
The political arguments against
higher interest rates and higher
unemployment are even stronger than they
were. Given the Government's commitment
to wider share ownership, it could be
disastrous for electoral prospects if in
the next few months, interest rates have
to be jacked up, producing capital loses
for many new investors and reducing the
cash flows of owner-occupiers.
Instead, the correct policy response
should begin with the urgent repetition
of the recent warning on mortgage
lending by the Governor of the Bank of
England. But the fundamental aim must be
to re-set the tax signals which are at
the core of the problems of house price
inflation, now much exacerbated by the
continuing liberalisation of housing
finance. Capital gains tax could be
extended to main residences and the
"Schedule A" tax on imputed rent
reintroduced. A good economic case can
be made for these. Simper would be the
announcement of a phased withdrawal,
over three years perhaps of mortgage
interest tax relief with a politically
advisable compensating reduction in the
standard rate of income tax. The
opposition parties would no doubt
incorporate egalitarian elements in such
a reform. But it seems virtually certain
that if the basic element of this
proposal were adopted by the Government,
they would swiftly include similar
proposals in their platforms.
Consider the consequences if such a
package succeeded over the next year or
two in rolling back the average level of
nominal house prices to, say, that
prevailing in 1984-85. It would impart a
major deflationary impulse to the UK
economy but one bearing largely on
prices, rather than activity.
Wage inflation would fall, lower
interest rates would be possible, not
only because of the reduction in
inflation but because of reduced levels
of credit demand. Consumer borrowing,
base don housing collateral, which is
destined to increase further with the
new freedoms of building societies,
would fall or grow more slowly bringing
down the growth in monetary aggregates
and in the volume of imported consumer
goods.
House and land prices would fall by
more than the average in London and the
South-East where the speculative excess
has been greatest. This would improve
the conditions for regional mobility,
make the labour market more efficient
and reduce a source of inflationary
pressure. An additional benefit would be
that the rental market in housing would
become relatively more attractive and
better supplied. Moreover, conditions of
falling house prices provide the ideal
moment to reform legislation in the
rented sector. Reform in the past has
been stifled by the rent increases that
would have resulted from liberalisation.
Who loses and who gains? The paper
capital losses of owner occupiers are
obvious but, for many, cash flows would
improve. Those with holdings of gilts
and equities would benefit from the
appreciation made possible by falling
interest rates. New buyers should
benefit greatly and, since as an age
group, many have been battered by
unemployment, high interest rates and
high house prices, that seems fair. The
worst affected would be incautious
lenders to the housing market; their
capital time as does their interest
income.
There are two other policy options
facing the Government. One is the
re-introduction of mortgage rationing
but this now looks feasible. The other
is an incomes policy of the Layard type
that would operate through taxes on
companies and which I favour as an
additional weapon in the campaign
against inflation.
Optimists will argue that basic
reform is unnecessary: there are
indications that house price increases
are slowing; the CBI data suggests a
slight fall of wage settlements in
manufacturing; the August trade deficit
was a statistical aberration; the
adjustment of house prices and consumer
debt to a new equilibrium after the
removal of rationing in 1981 is almost
complete and the new non-inflationary
equilibrium is just around the corner.
There may be something in all of these
ideas. But the financial markets have
become doubtful about the fundamentals
and I now share their doubts.
If my analysis is correct, the
present tax treatment of owner-occupancy
threatens not only future growth and
employment, but through the Government's
commitment to stock market values, its
own election prospects. For once,
political advantage and a
statesperson-like concern for the
unemployed and the future of the British
economy coincide.
(*) Research for this article was
undertaken with Olympia Bover.
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Last updated: 6 April 2000.
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